After mainline airline Air India and low-cost carrier SpiceJet had won bids in the first round of ‘UDAN’ bidding, India’s largest carrier in terms of market share, has made its intentions known of entering the regional aviation market. With the government creating an enabling environment to boost regional connectivity, IndiGo on May 9, announced that it was preparing for an ambitious development of its regional footprint. The Indian carrier will play a key role in the government’s Regional Connectivity Scheme.
ATR, the turboprop manufacturer, announced that it has signed a term sheet with India’s largest airline by market share, IndiGo, for the sale of 50 ATR 72-600 aircraft, with the flexibility to reduce the number of aircraft deliveries based on certain conditions. In a deal valued at over $1.3 billion at list price, the aircraft are expected to begin operations by the end of 2017. IndiGo’s plan coincides with the launch of the Indian Government’s Regional Connectivity Scheme called UDAN (Ude Desh ka Aam Naagrik) — provides for cap on air ticket prices and the Viability Gap Funding (VGF) for the participating, aiming to boost economic development, employment and tourism by connecting small and remote cities. After the first round of bidding, the Ministry of Civil Aviation is tweaking the scheme as to accommodate smaller players too.
India’s rapidly expanding domestic market represented close to 100 million passengers in 2016, and has been steadily growing by more than 20 per cent annually. It is expected to become the world’s third largest market by 2020. Under the RCS, 100 new airports will be created within the next two to three years, and airlines will receive financial support and other incentives to make air travel affordable.
To build a nationwide regional network
Aditya Ghosh, President of IndiGo, said: “In support of our Prime Minister Narendra Modi’s UDAN vision, we are embarking on a journey to build a nationwide regional network and connect cities that have not benefited from the growth in Indian aviation. The ATRs low operating costs will help us build a large regional air travel network with reasonable fares. These aircraft will feature modern cabin interiors, thus making the flight a comfortable experience for our passengers. The ATR’s outstanding operational versatility, along with their capabilities to land in remote airports with limited infrastructure will help us manage our operations efficiently.”
INDIGO WHICH IS AWAITING THE ATR AIRCRAFT SOON IS EXPECTED TO MAKE AGGRESSIVE BIDS IN THE SECOND ROUND. THE REGIONAL AVIATION SPACE IS INDEED GETTING ‘HOT’.
Christian Scherer, ATR’s Chief Executive Officer, declared: “IndiGo is one of the most respected, efficient and demanding airline in the world. Today they have selected the ATR 72-600s as the best solution to effectively implement their ambitious plans to build a nationwide regional network. Their decision further proves that our aircraft is the right tool to link communities and develop business throughout India.”
The ATR 72-600 has a passenger capacity of 68-78 seats. It runs on Pratt & Whitney 127M engines with maximum power at take-off at 2,750 HP per engine; maximum weight at take-off: 23,000 kg; maximum load: 7,500 kg and maximum range with full passenger load: 900 nautical miles (1,665 km).
IndiGo has 39.9 market share
IndiGo is India’s largest passenger airline with a market share of 39.9 per cent as of March 2017. The airline primarily operates in India’s domestic air travel market as a low-cost carrier with focus on our three pillars – offering low fares, being on-time and delivering a courteous and hassle-free experience. IndiGo has become synonymous with being on time. Since its inception in 2006, IndiGo has grown from a carrier with one plane to a fleet of 133 aircraft today. A single aircraft type (A320/A320neo), high operational reliability and an award winning service make IndiGo one of the most reliable airlines in the world. The carrier currently operates more than 900 peak daily flights connecting 46 destinations – 39 domestic and seven international.
IndiGo is not only the most efficient low-fare operator domestically but is also comparable with global low-cost airlines. From multichannel direct sales (including online flight booking, call centres and airport counters), to online flight status checking, an exclusive IndiGo app for Android, it has transformed air travel in India. Today, it is India’s most preferred airline.
ATR is the world leader in the market for below-90-seat regional aircraft. Since its creation, ATR has sold over 1,500 aircraft. ATR aircraft equip the fleets of some 200 airlines in nearly 100 countries. ATR is an equal partnership between two major European aeronautics players, Airbus and Leonardo.
Other players too getting active
The regional aviation space is getting abuzz, thanks to the government’s proactive policies. Hyderabad-based TruJet, which also flies ATR aircraft, has already announced plans to add more routes after initial success, while Alliance Air’s flights to Shimla from Delhi are sold out for the next two months. TruJet has been having 80 per cent passenger load factor and the airline is planning to add new aircraft soon. The airline currently operates a fleet of five 70-seater ATR aircraft. Out of these, 36 seats per flight are sold under the UDAN scheme. It sells these seats at Rs. 1,700 each, and seeks government subsidy of Rs. 2,500 per seat.
The government provides a subsidy to compensate for any operational loss due to fare cap. Under the scheme, Alliance Air is offering a subsidised fare of Rs. 2,036 per ticket and is getting a government subsidy of Rs. 3,500 per seat. Alliance Air flies a 50-seater ATR aircraft on the route, but due to payload limitations, it “can offer only 35 seats between Delhi and Shimla, and between 12 and 19 seats in return,” according to an Air India official who has been quoted in the media.
UDAN to be refined
There is likely to be a revision to the minimum number of seats on which the government will provide subsidy to an airline for operating to airports in Tier-II and Tier-III cities under the RCS. Currently an airline operating under the UDAN is entitled to subsidy on a minimum of nine and a maximum of 40 seats on a flight. The government’s rethink comes after requests from operators that they were willing to induct aircraft having four to six or more seats and requesting that subsidy be provided for these flights also. These changes are among those being considered when the government calls bids from airlines for operating on more routes under the UDAN.
The second round of bidding for these routes is expected towards the end of June this year although the Ministry of Civil Aviation officials admit that meeting the end June deadline to start the bidding process might be difficult. The second round of UDAN will also see the government drop some airports including Juhu in Mumbai, and Jalandhar. The lack of adequate traffic from Jalandhar is the reason for its being dropped, according to an official quoted in the media. Besides a better airport existed at Adhampur which was close to Jalandhar. The first round of bidding ended in March with the government awarding five airlines — Air Odisha, Air Deccan, Alliance Air, SpiceJet and TruJet the right to operate UDAN flights. IndiGo which is awaiting the ATR aircraft soon is expected to make aggressive bids in the second round. The regional aviation space is indeed getting ‘hot’.